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CPPIB Commits $330 Million to Canadian Private Equity

The Canada Pension Plan Investment Board (CPPIB) is putting an additional $330 million into a fund managed by NorthLeaf Capital Partners that invests in the Canadian private equity market.

The move is the latest in a series of commitments to Northleaf funds and Canadian private equity.

From a CPPIB press release:

This investment is in addition to CPPIB’s $70 million commitment in 2014 to the Northleaf Venture Catalyst Fund. Since 2005, CPPIB has committed $1.2 billion to Canadian private equity investments through its partnership with Northleaf.

The investment objective of this additional mandate is to focus on Canadian small and mid-market buyout and growth equity funds that are seeking to raise $1 billion or less in capital commitments.

CPPIB is one of the largest and most active investors in Canadian private equity and venture capital with approximately $4.1 billion in commitments to Canadian fund managers and an active direct private equity investment strategy for the Canadian market.

“By expanding our successful Canadian fund-of-funds program, CPPIB can effectively access the Canadian private equity market,” said Jim Fasano, Managing Director, Head of Funds, Secondaries & Co-Investments, CPPIB. “We remain confident in Northleaf’s capabilities, expertise and proven track record in continuing to manage this program.”

“We look forward to continuing our longstanding partnership with CPPIB in managing this additional mandate for the Canadian private equity market, and building a focused portfolio of top-tier Canadian mid-market funds,” said Jeff Pentland, Managing Director, Northleaf Capital Partners. “We are proud to have supported CPPIB in advancing their program since 2005, and we value and appreciate CPPIB’s continued confidence in our team, track record and investment process.”

The CPPIB managed $201.1 billion in assets as of March 31, 2014.

Photo credit: “Canada blank map” by Lokal_Profil image cut to remove USA by Paul Robinson – Vector map BlankMap-USA-states-Canada-provinces.svg.Modified by Lokal_Profil. Licensed under CC BY-SA 2.5 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Canada_blank_map.svg#mediaviewer/File:Canada_blank_map.svg

Real Estate Returned 11.82 Percent For Institutional Investors in 2014, Reports Group

U.S. institutional investors saw their real estate investments return 11.82 percent in 2014, according to the National Council of Real Estate Investment Fiduciaries.

The group also reported that 2014 saw the highest volume of real estate transactions among institutional investors since 2005.

Timothy Geithner To Speak at New Jersey Pension Meeting

Ex-U.S. Secretary of Treasury Timothy Geithner will speak at Thursday’s meeting of the New Jersey State Investment Council, the entity that oversees the state’s pension investments.

From NJ.com:

Geithner is president of private equity firm Warburg Pincus, which counts New Jersey as a client.

“It’s an important relationship for them, and it’s certainly an important relationship for us,” said Tom Byrne, vice chairman of the investment council.

Watchdogs are hoping the meeting will also mark the release of a long-awaited audit into the potential pay-to-play violations of Charlie Baker.

From NJ.com:

Seven months before the state decided to invest $15 million from its pension fund with the firm General Catalyst, which listed Baker as an “entrepreneur in residence,” Baker had donated $10,000 to the New Jersey Republican Senate Committee. The state has since sold its investment with the firm.

The results of the audit have been delayed for months. The investment council announced the audit in May, saying it was expected to take several weeks.

The meeting agenda can be read here.

Video: China’s Public Workers Wary of Pension Reforms

Here’s a piece from CCTV America covering China’s recent run of pension reforms — and how they are affecting workers.

Photo credit: “Asia Globe NASA”. Licensed under Public domain via Wikimedia Commons

Video: Kansas Treasurer Talks PERS Funding, Reforms

Here’s Kansas Treasurer Ron Estes talking about the condition of the state’s Public Employees Retirement System, the state’s 2012 reform law and his support for Gov. Brownback’s new proposal to issue $1.5 billion in bonds to go toward pension funding.

Photo credit: “Seal of Kansas” by [[User:Sagredo|Sagredo]][[User talk:Sagredo|⊙☿♀♁♂♃♄]] – http://www.governor.ks.gov/Facts/kansasseal.htm. Licensed under Public Domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Seal_of_Kansas.svg#mediaviewer/File:Seal_of_Kansas.svg

Video: African Pension Funds Diving into Private Equity

Here’s a panel discussion on the rise of private equity as an investment option for African pension funds. The discussion was held in January at an event sponsored by the Africonomie Group – but the footage was released this week.

From the video description:

Africa pension funds remain underweight in private equity due to restrictive allocations caps that limit or hinder investments into Africa PE funds. However this trend is changing, buoyed by increases in asset under management and better understanding of PE strategies – appetite for PE is growing. This interactive session explores innovative approaches to mainstreaming PE strategies in pensions portfolio.

Jacksonville Mayoral Candidate Wants to Use Sales Tax to Pay Down Pension Debt

Bill Bishop, a candidate for mayor of Jacksonville, this week addressed one of the city’s hottest topics: pension debt and reform.

Bishop said he would levy a sales tax increase and use the revenue to pay down the city’s pension debt.

From the Florida Times-Union:

City Councilman Bill Bishop, who is running for mayor, said Monday during a forum hosted by the Meninak Club of Jacksonville that putting a half-cent sales tax on the ballot would be the best way to shore up the finances of Jacksonville’s pension system.

[…]

Bishop said the economy is recovering so tax revenue is increasing, but not fast enough for growth to solve the city’s financial problems. He said a sales tax spreads the cost widely among residents as well as those who come into Duval County for shopping.

A half-cent sales tax would generate about $63 million and it would come with an expiration date if voters approved it. But state law currently doesn’t allow a sales tax geared specifically toward paying down pension debt. State lawmakers have been cool to the idea so there’s nothing in the works to schedule an election.

Jacksonville has been grapping for months with a way to pay for a proposed increase in pension contributions to the tune of $400 million over the next 10 years.

The city is trying to get out in front of its pension debt, to keep costs from spiraling further.

Photo by pshab via Flickr CC License

Canada Pension Chief Talks Profitable Alibaba Investment

The chief executive of the Canada Pension Plan Investment Board (CPPIB) talked with the Financial Post this week about the Board’s investment in Alibaba in 2011.

At the time, Alibaba was an unknown tech company in China. A few years later, the company’s initial public offering was the largest in history.

But CPPIB CEO Mark Wiseman says the investment was no “quick win”.

He told the Financial Post:

The US$314.5-million investment, while very profitable, happened because of a decision more than five years earlier to put “feet on the ground in Asia” by opening an office in Hong Kong in 2008, he said Monday.

“Our team in Hong Kong was able to educate our investment committee and others back here in Toronto, so that when the [initial] investment opportunity finally came to fruition in 2011, we were in a position to understand the business,” Mr. Wiseman said in an interview.

“They understood the Chinese market and the Chinese consumer. They had real experience in the region and understood both the similarities and, importantly, the differences between the way that retailing and trade are done in China [and how it’s done in North America].”

CPPIB subsequently increased its stake in Alibaba in 2012 and again through the IPO, and the combined stake is now worth “substantially more” than the cost base.

The CPPIB has a total of $314.5 million invested in Alibaba.

Photo by Charles Chan via Flickr CC License

Government Panel Likely to Call For Military Pension Changes

The Military Compensation and Retirement Modernization Commission has spent the last two years drawing up policy proposals to decrease the cost of military benefits, including retirement benefits.

The Commission will make the proposals to Congress on Thursday, but people familiar with the report have already been revealing its contents to the USA Today and the Military Times.

According to the sources, the report will propose big changes to the military’s retirement system – including the phase-out of the military’s current defined-benefit plan, in favor of a hybrid plan that features characteristics of a 401(k).

More details from USA Today:

The Military Compensation and Retirement Modernization Commission will propose detailed legislation to phase out the current 20-year cliff-vesting pension payable immediately upon leaving service, according to people who have been briefed on the report but requested anonymity before discussing its recommendations.

The plan calls for Congress to create a hybrid system that includes a smaller defined-benefit pension along with more cash-based benefits and lump-sum payments. A significant portion of troops’ retirement benefits would come in the form of government contributions to 401(k)-style investment accounts, those familiar with the report told Military Times.

Specifically, the proposal calls for automatically enrolling each service member in the federal government’s Thrift Savings Plan, or TSP, an investment account that accrues savings. Individual troops will be responsible for managing their accounts, and the money is typically not available for withdrawal without penalty until age 59.5.

But that same proposal would make it easier for troops to keep their retirement benefits after leaving the military. USA Today reports:

By allowing many troops to keep their TSP government contributions after separation, the new proposal would give limited retirement benefits to the vast majority who leave the military before hitting the traditional retirement milestone of 20 years of service, most of them enlisted members who do four, six or eight years, then leave.

That’s a big potential change from a system that now offers retirement benefits to about only 17% of the force — many of them officers — who serve 20 years.

The retirement changes would only apply to new troops – not anyone currently enlisted or retired.

All of these proposals would still need to get through Congress to become law. Military compensation is a controversial area for cuts, so it’s unclear if the political will exists to move forward with the retirement system changes.

Photo by Brian Schlumbohm/Fort Wainwright PAO

Where Does Bruce Rauner Stand on Pension Reform?

When talking pensions on the campaign trail early in 2014, Bruce Rauner said that new hires, current workers and retirees all would need to be on the receiving end of pension benefit cuts.

But Rauner has softened that stance in recent months; the Illinois governor now says the benefits accrued by current workers and retirees need to be protected.

From NBC Chicago:

[Rauner remarked] that it’s most important to “protect what is done—don’t change history. Don’t modify or reduce anybody’s pension who has retired, or has paid into a system and they’ve accrued benefits. Those don’t need to change.”

[…]

“What we should change is the future—the future accruals, the future benefits for future work,” he said, according to the Chicago Sun-Times. “That is constitutional. It’s also fair and appropriate for the taxpayers and the workers themselves.”

“Hopefully (the state Supreme Court) will give us some feedback that will help guide the discussion for future modifications as appropriate for the pensions,” noted Rauner.

Rauner’s website has also been updated accordingly and clarifies his official stance further. He is still pushing for a switch to a 401(k)-style system, but he wants to keep current retirees insulated from any changes:

We must keep our promise to current retirees, but we put all government workers at risk by continuing to promise a pension no one can afford.

[…]

We must boldly reform our pension system. To do that, we can:

* Ensure pay and benefits do not rise faster than the rate of inflation.

* Eliminate the ability of government employees to receive massive pay raises before they retire just to increase their pension.

* Cap the current system and move towards a defined contribution system.

The change in sentiment is perhaps due to a circuit court ruling late last year that overturned the state’s pension reform law, which made it more unlikely that pension reforms can legally come in the form of benefit cuts for retirees.

The law is currently being heard in the halls of the state Supreme Court.

It could also be that Rauner, since taking office and taking the temperature of fellow lawmakers, is now more in-tune with the political realities of steep pension cuts, and doesn’t see the worth in pushing an unpopular policy if it has little chance of coming to fruition.

By Steven Vance [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

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